What's Next for Venezuela's Oil After Maduro's Capture?

The U.S. capture of Venezuelan President Nicolas Maduro on January 3 has thrown the future of the nation's struggling oil industry into deep uncertainty. Major investment banks Goldman Sachs and UBS agree that while the political landscape has shifted, any significant recovery in oil production will be a gradual, capital-intensive process.

Despite the dramatic news, oil markets remained calm. Ice Brent crude futures held steady at just under $61 per barrel in early London trading, showing little immediate reaction.

US Policy and Sanctions Remain Key

Following Maduro's capture, U.S. President Donald Trump announced that Washington would temporarily run the country and overhaul its oil sector. However, Secretary of State Marco Rubio later clarified this position, stating the U.S. intends to influence policy in Caracas rather than execute a direct administrative takeover.

Crucially, Rubio confirmed the U.S. will maintain its "oil blockade" against Venezuela to retain leverage. This sanctions policy is the most critical factor for short-term crude output.

According to Goldman Sachs, a change in U.S. sanctions could dramatically alter the market. The bank estimates that a 400,000 barrels per day (b/d) increase in Venezuelan output by year-end could push Brent prices down by $2, to an average of $58 per barrel in 2026. Conversely, a similar production decline would have the opposite effect.

Wall Street's Cautious Forecast

Both banks are tempering expectations for a rapid rebound. In November, Venezuela’s production stood at 934,000 b/d, based on an average of Opec secondary sources.

• UBS does not foresee a significant impact on global oil balances over the next 12 months. The bank suggests output could rise modestly toward pre-embargo levels only if U.S. restrictions are eased. The U.S. imposed its oil blockade in December, seizing tankers to cut off Caracas's revenues, though the full impact of this move is still unclear.

• Goldman Sachs highlights the dependency on U.S. sanctions policy as the primary driver of near-term production levels.

The Challenge of Tracking Exports

Gauging Venezuela's current oil exports is notoriously difficult, as the country employs tactics to hide shipments and evade sanctions. This has led to conflicting data from maritime intelligence firms.

• Kpler reported that December exports rose by 52,000 b/d from the previous month to 827,000 b/d.

• Vortexa painted a different picture, tracking a 282,000 b/d fall in exports to just 556,000 b/d for the same period.

The Long Road to Recovery

The long-term outlook for Venezuelan crude depends on the political transition that follows Maduro, who now faces multiple criminal charges in the U.S., including narco-terrorism and cocaine importation conspiracies.

Venezuela's oil output collapsed from a peak of around 3 million b/d in the early 2000s due to a nationalization program, chronic mismanagement, and crippling sanctions.

Even if Western oil companies return, rebuilding the sector will require enormous time and investment. The country holds the world's largest proven oil reserves, but its extra-heavy crude is both expensive and technically complex to extract.

As Goldman Sachs noted, "Higher recovery rates of heavy Venezuela oil will likely require financial and time-investments in oil-processing upgraders and improvements in operational efficiency, power availability, and oil transporting infrastructure."